up. the upper three are the regional groundwater projects and the local groundwater projects. those will be coming to you for project approval late this year, potentially early next year to move that forward and get those supplis in place. the recycled project is going to take a little bit more time. we're just starting the ceqa process on that this year. we do have the eastside recycled project and various recycled water projects there. not a lot the water, but every little bit counts. and then in the last of the blue bars is the regional desalination project and that is probably the biggest decision we'll make in addition to transfers because that is the way to generate water to make that shortfall go away. those are the big things that are necessary to actually resolve that level. again, we don't have anything on the transfer line because discussions are going so slow

on this front. so the bottom line out of all of this, really comes down to these four things: we have a water supply shortfall with regard to our contractual commitments and that is a problem we need to remedy. secondly, we'll close that gap, but it won't eliminate it because of the regulatory shortfall we have out there. the only way to close that gap that is apparent right now is through the desalination project or a significant transfer or some combination. these opportunities are available, but bringing them to fruition is challenging. this continues to be a challenging road to get down, but we have the obligation to do it and we need to fulfill that obligation. so that is the story for san francisco. is there any questions for me or we can turn it over to mr. jensen? >> any questions? >> i have some as well. >> go ahead. >> i think it's actually

helpful to take a break between the san francisco and the bawsca part of it. if you recall, for the last two years, i think, it's correct. at our planning workshops, this commission has expressed a desire to be the regional water supplier. and we haven't codified that in a resolution, nor an ordinance or anything or a contract, but we have indicated that that is our desire. when we look at the information that steve has just presented to us, i think we have to draw -- we have to look at whether our planing is sufficient to make that desire come to fruition. and at this stage i think we have to conclude its tase not. let me give you a couple of facts that come out of this, the 265 mgd, steve said stated

correctly there is 184, which is our supply obligation to our wholesale customers and there is 81 which is the san francisco share of that. if you look only at the san francisco supply and demand comparison, we're actually in pretty decent shape. and we are continuing to invest in san francisco water supply, that is in excess of our projected needs. that is a fact and you can argue whether it's a good thing or a bad thing, but it certainly provides for economic growth in the future, but that is a fact. when you look at the wholesale customers' side of things the picture is not so rosy. the 265, which is our level of service goal, we can't deliver today. and if we do, everything that is on our planning roster, if we do everything, including the 9 mgd, for the desal facility we won't get to a yield of 265

mgd until 2025. and we don't -- and we're not forecasted to get above that at all. so that puts us in a position where for the questions that the water supply agreement asks or commits us to answer by the end of 2018, there are three. do we make the interruptible customers permanent? second is do we agree to provide water above 184 to the wholesale customers? and three, do we increase the supply assurance for the wholesale customers? and as of today, and giving the planning that is on the books for now through 2035, the answer to all three of those questions would have to be no. so that is a fact. and it's one that is, i think inconsistent with our general

desire to be a regional water supplier and it's certainly the situation that bawsca has to face as they look to their future as well. it's a slightly different version of the conclusions, but it does fit with our contractual obligations. >> any other questions? >> i have a couple. when reviewing the conclusions, i don't understand how we're going to deal with those contractual commitments. what is the strategy that you have in mind? >> the strategy we have in mind at this point is to -- >> conservation and what else? >> no, actually, it's the -- it's one of the big-ticket items, regional desalination or transfers and those are both challenging to accomplish, but the ones that have the most potential to get us to that finish line. >> i understand the potential. i don't understand the reality. how much are we talking about in terms of a desalinization

effort? >> in terms of dollars? >> yes. >> actually i don't have the dollar figures for each of those projects with me at this time. the cost per acre foot for the regional desal project pencils out currently at $1900 per acre foot, which is actually attractive. the reason why it's actually that attractive is desalting brackish water as opposed to saltwater and so the energy cost is lower than taking seawater. >> so it's less salt? >> yes. >> and that location for that desalinization plant would be where? >> it would be in east contra costa county. >> so we're still looking at east contra costa? >> yes. >> and the estimated timeline? >> in the 2023-2024 timeframe. that project we estimate would take ten years we need to develop.

>> so we're not talking about a desalinization effort to deal with the 20% reduction in supply, correct? >> that is correct. >> for this year? >> correct. >> so we're not even realistically able to meet that demand until -- if, in fact, the desalinization effort goes through, not until 2023 we'll be operational? >> something like that, yes. >> so a ten-year timeframe? >> yes. >> what happens between that? i understand it's a goal and potential and i'm concerned about what are we going -- how do we make up the shortfall? conservation is one. right? desalinization is ten years from now and water supplis are needed now, how do we meet them now, today? >> actually the easy answer is right now demand is depressed. this year we'll probably deliver on average, 224 million gallons per day. so that we are -- we have sufficient supply for that without ration

at this point in time. it is still far short of our obligation under the contract to get to 265. >> so when you talk about transfers as another part of that conclusion, where are you looking to transfer water from? >> currently we're in discussion with oakdale irrigation district. >> where are they located? >> oakdale. >> i'm sorry, oakdale, the hershey plant? >> yes. >> chocolate and water. [ laughter ] >> that is how i measure my geography. >> i think it's the pink pig bbq. >> that is also true, having campaigned in those areas often and not soon again. what other opportunities are available when you say bring in challenges? i think the desalinization should be in that category of challenges. >> it is challenging. >> so are we even being realistic to put that into the context of a discussion? >> i think we are being

realistic. we have actually had some very successful outreach on that project. i think as people learn more about it, they've come to the conclusion it's not boogey man and because we're dealing with brackish water than seawater and you are taking constituents out and diluting back in and it's actually a good project. we'll have to have project partners on that to make that work, including it east bay mudd and contra costa water district. >> the last time we looked at that was in the 1990's and they looked at $4 billion for desalinization but that was seawater. >> that is the single biggest differentiation. >> what does that amount to?

>> icopt couldn't give you that number. >> get back to us. >> other questions? >> i have a question. >> i notice there had is no reference to storage and i wondered why. >> basically in the wsip we came forward with the calaveras dam, built to the elevation of the existing dam, but built in the way it could be increased by size in the future to have additional storage. i think as part of the wsip agreement that was the conclusion at that time that additional storage would be a future decision at some point down the road. >> and that would be our only additional storage? >> that is the most obvious.

o'shaughnessey dam as well and looking for additional groundwater storage opportunities we may find out the work within the groundwater storage and recovery project to actually operate the basin to achieve more storage there. we won't know until we operate that project. it's all modeling now to assess it, but when you really operate it, you may find more opportunity there. those are limited options available to us. we're also looking and kind of related to storage at other potential transfer opportunities. people do call us from time to time saying that i have got some water that i would like to transfer. i did have one from the northern california coast up way north, how they would get it to us was a little bit of a mystery, but they had water they were interested in selling. so we get calls like that all the time. >> what county was that? >> humboldt. >> no chocolate there. >> no chocolate, just marijuana. [ laughter ]

>> also, could you expand on don pedro project? >> the ferc project? >> yes. >> i would look to don on that. >> the don pedro is currently in stages -- two irrigation districts will file draft license applications and the final license application is filed in april. at that point, ferc will start to consider the kind of full requirements that might be required, but at this point it's really ditch to difficulty to say what is the potential hit on san francisco. >> is that owned by east bay mud? >> no don pedro is owned by turlock. the flood control obligation is transferred to the districts and also the city has the

ability to pre-pay their water rights in advance and divert upstream. so it kind of acts as virtual storage for us. it's not storage we can divert out of reservoir, but allows us to operate the hetch hetchy project to increase your yield. >> the storage there is just for irrigation? >> that is correct. any water in don pedro is completely under control of the districts and pursuant to their water rights and not ours. >> commissioner moran? all right, thank you, mr. ritchie, if you can get me those answers later, that would

be great. welcome. >> >> good afternoon. art jensen with [pwa-ufrpbgs/]. >> and here we thought you were retiring. >> pardon me? >> and we thought you were retiring. >> not yet. >> good. what do you mean "good? [ laughter ] >> okay. sorry, i couldn't resist that. >> for the sake of the decisions that our bode will are have to make we're adding the word "with certainty." businessstitions or policy decisions that the board is going to be forced to make investments of public money and they want to make those

decisions with some certainty and that doesn't mean all certainty and doesn't mean we'll be able to predict hide rawling, but it means what you or anyone else would reasonably thin as i said to our board policy commit, i never got to quote linc, but the one i like, the best way to predict your future is to create it and we're in the process of create our future. second, it's certainly one of the least expensive supplies available to us, but no

[s-erbt/] it will be there. in 2008 when the planning commission certified the peir and adopted it and did its action with respect to the p [kwrao*-eufr/] for the wsip, your decision included limiting deliveris to us to 184 mgd until 2018. when i say "to us," i mean all of the wholesale customers, the permanent customers that have contract able rights to 184, as well as the two interruptible customers included in the 184. so that is a limitation in which we will. next rationing up to 20% systemwide during droughts and commissioner torres asked the

question earlier, how are the agencies in the state affected? our member agencies take their share of the water during a drought and divide it amongst themselves with a formula that they got together and adopted. some agency vs.s land use very similar to san francisco, like daly city. other agencis have different land use and they are required to reduce more. even with a 20% systemwide shortfall, your own consultants did work for you in a letter to the state board recently and in your packet is cited for 20% and economic losses up to i think the number was $3.8 billion for one-year of drought.

$3.8 billion for one year of drought and that suggests that an investment can or should pe made and we'll get back to that later. as steve articulated to you and you discussed the city is not yet able to meet the adopted drought level service of goal at this time. so that is a source of unseparate for us and then finally, you may or may not continue to serve san jose and santa clara whether it's 9 mgd or something less is a decision in the future. it's cited here not as a policy decision that you have made. it's just cited as a source of uncertainty that we're dealing with. we make planning decisions to address these uncertainties and the first one is that san francisco will meet its level of service goal for drought reliability. that may be a hazardous

assumption. based upon the conversation you just had and the concerns that you raised. but that is our assumption that you will make good with that contractual commitment. and that is 80% of 265 or 212 mgd. steve gave you the inverse, reduction -- most of which we would absorb, but that is a number we're going to use for planning. we are interested in reducing that economic impact, which means that we have to know where we are starting. that is where we expect to start. it could be amended by mutual agreement and that could be a discussion we could have, but at this point we're assuming for planning purposes we're assuming that relationship does

not change. second, we are assuming that san francisco will not provide greater drought reliability. tough enough to meet the obligation that you have already taken on and we're assuming that you are not going to investment additional money to reduce that economic impact, particularly since most of the impact may be outside of san francisco. it's not a policy decision that you have made or even discussed., it's a planning decision that we're making. next we're assuming that make good on that as you have in the past. second, we're assuming or next we're assuming that san francisco will not provide the wholesale customers more than 184. again, not a policy decision that you have made, but it's a conservative planning assumption for us and i think a prudent one. next, we assume that san francisco will defend all of its water rights. that is an obligation that you

have under the water supply agreement and one you have always taken seriously and yet, coupled with that, our assumption is that san francisco will never deliver more than an average of 265 mgd. that is not a policy decision you have made, nor discussed, but it's a conservative planning assumption for us. it may be a reasonable one. so let me go on to what our board will do. our board will consider whether to adopt its own level of service goals for drought reliability and how much should we investment in additional drought reliability to minimize that economic impact or make it acceptable? the opposite question, does it make sense not to invest in more drought reliability? and that is hard to say yet to. it does not make sense. and to bring that home to my

directors, i said knowing the potential downside risk, how would you explain that to residents, businesses, employers, and to the media? when they say you knew this train was coming, why didn't you get off the tracks? that woke up the remaining directors that were still asleep woke up when i said that. no one wants that microphone in their face. we certainly don't. we will present information to the board in the fall and have economic impacts of various water shortage and we're working alongside your staff and relying upon the report that will be coming out of your consultants at uc berkeley. we'll also present at the board the potential -- the cost of potential ways to enhance reliability and reduce economic impacts that is based upon work

we have done over the last three years or so. the future challenges that we

have to address and these were contained in a slightly different order and wording in the brochure i gave you last time. the first is protect against water shortages, additional drought or growth by 2013. this year we expect to be taking on these decisions, as i mentioned this fall. about investments in -- additional investments for district court-protection. next implementing our long-term reliable water supply strategy. that will be completed the end of 2014. at which point the board can consider projects to be implemented for future reliability. r and future supplies. about 2018 to make sure had a san jose and santa clara have reliable supply of water. in 2018, you folks will be making decisions about whether or not there will be additional supplies available to the wholesale customers. we're not going to wait until 2018 to interact with you on that. we'll see if your planning suggests projects that might be pursued.

we are pursuing already things that are less costly. and then finally, a new drought agreement amonour member agencies, the drought allocation agreement that they have today sunsets in 2018. so by 2018, we did -- they did that on purpose. they wanted to make sure that they could take advantage of new information, whatever new supplies may or may not be available to rejigger that drought allocation formula, if

they so chaos and so it expires and will have to be re-negotiated before it expires in 2018. and finally the completion of the water improvement roagreement with date of 2015 in it and that is something that you may well wish to have resolved. why are we doing this? very simply as i said at the beginning our agencies need certainty. the communities need certainty. the puc as commissioner moran pointed out, you have discussed being a regional water provider, but your actions are not yet consistent with that. not to say that they couldn't be, but they are not yet there and that is the basis for the assumptions that we make. the wholesale customers voted to form bawsca for these purposes to work with the city and county of san francisco. no other agency has this authority specified under law. no other agency accountable through representative governance to those customers and we take that very seriously. i think if the day comes when there are those economic impacts, the microphone is going to be in my face or my successor's face and not yours and so we take this very seriously. finally, what do we want from san francisco ? if i were to be so bold to say here is what we would like from you in return: first that you provide support in the way of

what you are doing today, with continued coordination for studis and for the work that we are doing. you have done computer analyses for us in terms of projects that we have might affect or be transferred to your system. second, access to the regional system for implementing water management alternatives, and i say "water management alternatives." and both of those require movement of water through your pipes. if it's a project that uses your system, you have other concerns, but we would like to work with you and hope that agreements could be forthcoming. joint projects that could add value with certainty and i want to add "the with certainty." san francisco, i don't have to tell you, san francisco is a daunting place in which to work or to work with and the fact that the environmental

decisions that would be made by the governing bodies of any of our agencies are made in this city by a separate commission, not this commission. so with certainty, if we were going to do a joint project, there would be a useful discussion who would be leadion is agency? who would be best served if the city was lead agency or we were lead agency or a member agency was the lead agency? those are decisions that should be made, but not assumed at this point in time. and if san francisco were to do those things we believe it would be consistent with your contractual obligations; it might go beyond them, your current obligations, but consistent with them and it would be good public policy for all those involved. with that, i will put up a photograph of your beautiful reservoir and be glad to entertain any questions or comments. >> any questions? none? commissioner? >> first of all, art, thunk very thank you very much, i

can't recall this type of presentation from bawsca to this commission and i think it's something that is very positive and i appreciate your willingness to do that. i'm not sure how to ask the question, where does that fall in your thinking process in terms of priority compared to increasing supply above 184? >> and the question is about changing the drought split between san francisco and the

wholesale customers? >> well, that and/or the agreement that you have with your members or trying to obtain an amount of water that would allow you to lessen the impact of that. if you are going out after water, you could decide that would be for additional supply to your members above 184. you could also decide you were going to stay within 184, but make it a more reliable supply. has bawsca expressed an opinion about that? >> at the board-level, no. and i am normally reluctant to negotiate in public, i have done it before, but i will give you my views on the tier 1 split.